With the tax year end soon to be upon us, we should all be thinking about utilising our annual ISA allowance. The cut-off date is 5 April so action needs to be taken now.

There is no rollover of unused relief from one tax year to the next.

What are ISAs and ISA allowance?

ISAs, or Individual Savings Accounts, are savings accounts that you don’t have to pay any tax on. The main distinctive difference between ISAs (including stocks and shares ISAs) and other savings vehicles is that ISAs offer tax-free income and gains, which means you can get more for your investment.

The annual ISA allowance is a limit to the amount you can put into an ISA every tax year. The allowance for this current tax year is £20,000.

Tax implications of an ISA and what ISAs can be used for

You are probably aware that growth, income and withdrawals are not liable for income or capital gains tax but, to be clear, the value of an ISA will form part of your Estate for Inheritance Tax purposes.

As part of your £20,000 annual ISA allowance, it is possible to invest up to £4,000 in a Lifetime ISA which receives an annual Government bonus of up to £1,000 a year. To qualify you must be over 18 but under 40 years old to open a Lifetime ISA which can be used to buy a first home or fund retirement.

Existing savers into Help to Buy ISAs can continue to put up to £200 per month towards securing a mortgage to purchase their first home. Providing the funds are used to buy a first home the savings will earn interest and qualify for a 25% Government bonus of up to £3,000.

Junior ISA

If you have children under 18 there is a Junior ISA where up to £9,000 per annum can be paid into the account. These deposits can be made either by the under 18 individual or by those who wish to save on behalf of the minor, a very useful long-term savings idea.

Already used up your ISA allowance?

If you have used your ISA allowance for this tax year, you could consider transferring your excess savings into a spouse or civil partner’s ISA.

If you don’t already have an ISA, you should give serious thought to starting one now. If you do that before 5 April 2021, you can still utilise this year’s allowance of £20,000. For further advice about your situation or if you have any questions, contact us at to book a free, no-obligation call with one of our advisers and we will get back to you as soon as possible.